The eurozone crisis is all about bankruptcy. But this isn’t just economic. There is intellectual, moral, and political bankruptcy as well.
Here are just three examples from last week.
First is intellectual bankruptcy. Every time an economist is interviewed on Radio 4’s Today programme, he—it is almost always a he—says Greece should default on its debt and leave the euro.
You can hear the interviewer’s jaw drop in shock and horror at this affront to the official line that the euro is sacrosanct.
Samuel Brittan headlined his Financial Times column on Friday of last week, “Why I would have voted no in a Greek referendum.”
Brittan helped to invent monetarism back in the 1970s, so he’s a suspect source. But in this case his reasoning is impeccable:
“The one form of adjustment that is made a condition of financial support is ever more severe fiscal austerity.
“Never mind that Greek national output is already more than 9 percent below its 2008 level and industrial production nearly 23 percent down.
“Never mind that unemployment has soared to 17 percent.
“The Greeks are being told by international institutions and creditor countries to squeeze, squeeze and squeeze again.”
Secondly is moral bankruptcy. Greek prime minister George Papandreou’s call for a referendum on the latest bout of austerity was a desperate manoeuvre that rebounded on its author.
But the visceral rage at his move displayed by the European Union elite—headed by Angela Merkel and Nicolas Sarkozy—is instructive.
The idea that Greek people should have a say on a package including lower wages and pensions, fewer jobs, worse services and higher taxes outraged them.
This is of course how the whole European project has developed—imposed from above, contemptuous of popular opinion.
But now Merkel and Sarkozy are pushing for greater fiscal integration in the eurozone.
This will lead to a further erosion of democracy. Unelected and unaccountable officials—even the European Court of Justice, if Germany has its way—will police member states’ taxing and spending.
Thirdly is political bankruptcy. The G20 met in Cannes last week.
This is the global economic coordination that has been expanded to include “emerging market” countries like China, India, and Brazil.
Supposedly the first summits of the G20 in 2008–9 saved the world economy. What did it achieve this time? Zilch. Of course, everyone is blaming the political turmoil in Greece for this. But this is an evasion.
Merkel and Sarkozy may be able to gang up on a small country like Greece.
But they aren’t really agreed on the latest “rescue” of the eurozone supposedly adopted by yet another EU crisis summit a fortnight ago.
The critical issue concerns how to raise the vast amounts of money the European Financial Stability Facility (EFSF) needs to prop up debt-ridden
eurozone banks and governments.
Hence the humiliating money-raising trip by EFSF chief Klaus Regling to Beijing.
In the old days, the US would have intervened to bang heads together and help find the money.
But with the US economy stagnant and Tea Party neanderthals making the running in Congress, Barack Obama lacks the political and financial capital to play this role.
The Financial Times commented: “For anyone wondering what a world with diminished US capacity to lead looks like, the eurozone crisis is displaying Western weaknesses on a wide screen.
“A possible contribution from China to the eurozone bailout hit a raw nerve in Washington for precisely this reason.”
Eurozone leaders have also looked to the International Monetary Fund (IMF), already helping to police austerity in Europe, for money to prop up the eurozone.
But Obama, supported by David Cameron, blocked an increase in contributions to the IMF.
This is partly because they’re worried about domestic political flak and partly because they argue the eurozone could find the money itself.
During the Great Depression of the 1930s, Leon Trotsky wrote: “The historical crisis of mankind is reduced to the crisis of the revolutionary leadership.”
Today it is the crisis of capitalist leadership that dominates.